Depreciation on laptops

[JNG]

Does anyone know what the depreciation on laptops is?

An example:
James joins a Company and receives a laptop. The Company bought the laptop for R10,000. After 2 years James is leaving and is offering the option of buying the laptop. What is a fair price for James to pay?

[MickeyD]

Offer R3333

3 years.

[ponder]

3 years.

[JIMMYtheSKULL]

If im not mistaken for actual IT equipment depreciation in our company is done in 12 months.

[MickeyD]

If im not mistaken for actual IT equipment depreciation in our company is done in 12 months.

In that case it is expensed and there is no depreciation involved.

I don't think that is quite correct.

[T-Man]

I think SARS allows 3 years straight line depreciation.

[AfricanTech]

3 years

[Goliath]

I think SARS allows 3 years straight line depreciation.

If cost is under a certain amount(think R7000 or something?) you can write it off in 1 year for tax purposes..

[MickeyD]

If cost is under a certain amount(think R7000 or something?) you can write it off in 1 year for tax purposes..

Correct (the amount could differ from company to company). But a company would be wiser to use the "concession" to write it off over 3 years as allowed by SARS.

[Just_Ice]

For tax purposes, 3 years.
If the cost is less than R7000, for tax purposes, it is all deductible immediately.
For accounting purposes, its purely up to company policy, although if it differs from the SARS interpretation note, its going to have deferred tax consequences.

[Goliath]

For tax purposes, 3 years.
If the cost is less than R7000, for tax purposes, it is all deductible immediately.
For accounting purposes, its purely up to company policy, although if it differs from the SARS interpretation note, its going to have deferred tax consequences.

I agree, best to keep it inline with SARS as deferred tax is a pain!

[Cius]

I work for a bank and know for a fact that we do it in 3 years. My last laptop broke after 3.5 years and when they saw the book value was 0 they just got me a new one. Still, why is he offering a price? The company should know the assets book value and be telling him a price, not the other way around.

[MickeyD]

I work for a bank and know for a fact that we do it in 3 years. My last laptop broke after 3.5 years and when they saw the book value was 0 they just got me a new one. Still, why is he offering a price? The company should know the assets book value and be telling him a price, not the other way around.

If he offers a higher price they make a profit on the asset disposal! Bloody shysters....

[WilD_CaT]

If he offers a higher price they make a profit on the asset disposal! Bloody shysters....

...no

In essence all that does is correct the over/under depreciation based on estimate/policy in the first place.

E.G. Laptop costs R10 000. Company pays cash of R10k upfront.

Regardless of what depreciation policy I have those are the upfront costs and cash outflows.

1. Depreciate over 3 years and sell for R1000 at end of life (Book Value = 0).
Expenses over 3 years = R10 000
Profit on sale = R1000
Net = R9000 expensed through IS

2. Depreciate over 5 years and sell at end of year 3 for R1000. Book Value = R4k
Expense for 3 years = R6000 (R10k/5X3)
Loss on sale = R3000
Net = R9000 expensed through IS

3. Depreciate it over 3 years with a residual of R1k (Book Value = R1k)
Expense for 3 years = R9000
Profit = 0
Net = R9000 expensed through IS

It doesn't matter what policy you use, whether it is too fast or too slow, once the sale realises it is all the same.

There are tax/timing (Deferred Tax) considerations but the company isn't profiting or making more money or ripping of the employee if they charge more than book value...

To understand it more simply, regardless of the depreciation number chosen, Cash outflow in Year 0 is R10k and cash inflow from Sale is R1k. Net is R9k outflow of cash.

Cash is king! Accounting is accounting and finance is finance.

[WilD_CaT]

Does anyone know what the depreciation on laptops is?

An example:
James joins a Company and receives a laptop. The Company bought the laptop for R10,000. After 2 years James is leaving and is offering the option of buying the laptop. What is a fair price for James to pay?

Fair price is the market value of the laptop not whatever book value the company has.

Try find a similar laptop (Specs/Make/Model) on classifieds and whatever other people are asking and make an offer in that range.

If company is asking for more, then don't buy. If they are asking less, then possible bargain. Like any other product.

Don't get confused by accounting jargon such as depreciation or some such nonsense. Just think about how you would approach any other offer.